China's U.S.-trade surplus sets record

Women make blessing decorations for the Feb. 5 Lunar New Year in Xingtai County, China.
Women make blessing decorations for the Feb. 5 Lunar New Year in Xingtai County, China.

BEIJING -- China's 2018 trade surplus with the United States surged to a record $323.3 billion, but exports contracted in December as the delayed effect of President Donald Trump's tariff increases started to hurt demand.

Exports to the United States in 2018 rose 11.3 percent to $478.4 billion despite Trump's punitive tariffs, customs data showed Monday. Imports of American goods rose just 0.7 percent over 2017, reflecting Beijing's retaliatory tariffs and encouragement to importers to buy more from non-U.S. suppliers.

In December, Chinese exports to the United States, which had held up through much of the year, fell 3.5 percent from a year earlier to $40.3 billion. Sales to the U.S. had kept growing by double digits in previous months as Chinese exporters rushed to fill orders, but forecasters said American orders would slump once the full effect of Trump's penalties hit.

The contraction adds to pressure on China to resolve the battle with the U.S. at a time when the ruling Communist Party also is trying to reverse an economic slowdown.

"The external environment is still complicated and severe," a customs agency spokesman, Li Kuiwen, said at a news conference.

Li cited dangers including "protectionism and unilateralism" -- a reference to Trump's import controls -- as well as a possible slowdown in global economic growth and a decline in cross-border investment.

U.S. and Chinese officials ended a three-day negotiating session last week with no sign of agreements or word on what their next step would be.

"The record U.S. trade deficit with China will sit uncomfortably with the Trump administration," Nick Marro of the Economist Intelligence Unit said in a report. "That may cast a shadow over the next round of trade talks."

Trump and his Chinese counterpart, Xi Jinping, agreed Dec. 1 to postpone additional tariff increases by 90 days while they negotiated. But penalties of up to 25 percent already imposed on billions of dollars of each other's goods remain in place, raising the cost for American and Chinese buyers of soybeans, medical equipment and other goods.

Trump is pressing Beijing to roll back plans for state-led creation of Chinese champions in robotics and other tech fields. The U.S., Europe and other trading partners complain such policies violate China's market-opening obligations. Chinese officials have suggested that initiatives such as "Made in China 2025" might be opened to foreign companies, but they refuse to abandon strategies they see as a path to prosperity and increased global influence.

Chinese leaders are trying to reduce the country's reliance on trade and nurture self-sustaining economic growth based on domestic consumer spending. But their plans call for keeping exports stable to avoid politically dangerous job losses.

Some companies have shifted production of goods bound for the United States, moving it out of China to avoid the tariffs. Others are lining up non-Chinese suppliers of industrial components.

December's trade contraction is "likely to continue into 2019 due to falling foreign demand, including demand for Chinese-made electronic products," Iris Pang of ING said in a report.

In December, China's global exports shrank 4.5 percent to $221.2 billion while imports declined 7.2 percent to $164.2 billion.

For the full year, global exports rose 7.1 percent to $2.5 trillion, down from the 7.9 percent increase for 2017. Imports rose 12.9 percent to $2.1 trillion, down from the previous year's 15.9 percent.

The country's global trade surplus was $352 billion, a marked drop from 2017's $509.7 billion. That reflects relatively stronger Chinese economic growth and consumer demand compared with its trading partners.

Given Trump's frustration with China's huge trade gap with the United States, the latest data might fuel demands by hard-liners in Washington to punish Beijing.

Still, Louis Kuijs of Oxford Economics said he expects Washington to extend its 90-day deadline after the "positive vibes" of last week's talks.

"We do not see the U.S. fully removing the specter of tariff hikes any time soon," he said in a report. But a deal for "a more lasting suspension of new tariffs" looks more likely, he said.

Business on 01/15/2019

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